Is equity release safe? My mother is considering it

Remortgaging can be a useful way of raising money for home improvements. Picture Getty Images

Equity release can be a useful way of raising money for home improvements - Credit: Getty Images/iStockphoto

The equity release industry has grown significantly in recent years, and it's very possible that you have seen adverts for it on the TV. Popular for seniors, you may find that your mother and father could be considering it as a way to top up their pensions. 

With more than 80,000 equity release mortgages approved in the last year, this allows people over the age of 55 to release money that is tied up in their homes. If they own their property outright or have built up a lot of equity in their mortgage, they can release between 20% to 60% of the property’s market value in one lump sum, tax-free and use this to fund their retirement, gift to their children or even make home improvements. 

Whilst still a fairly new product, there may be some questions to raise with your equity release provider and you should take your time to consider your options, especially if your parent or grandparent is considering it.  

We speak to David Beard, the founder of Lending Expert, who specialises in secured loans and equity release, to shed some light on the matter. 

So is equity release safe? 

“Yes, equity release is perfectly safe,” confirms Mr Beard. 

“The industry is regulated by the Financial Conduct Authority and any brokers and providers have to be members of the Equity Release Council which outlines strict rules to protect consumers. So if your provider is regulated by one of these and has a license number, you are safe to proceed.” 

Some of the most important rules include a limit on how much interest lenders can charge and the right for each customer to continue living in their home until they die or go into long-term care. 

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Borrowers have the choice to retain full ownership of their home or sell off part of this to the lender to raise larger amounts. 

Plus, there is the ‘no negative equity guarantee’ which means that when you die or go into long-term care, you can simply sell your home and your debts will be cleared - and your family will not be left with any further debts to pay. 

What do I need to consider before getting equity release? 

“Whilst equity release has real benefits, there are some things to consider,” explains Mr Beard. 

“Since you are paying interest on equity release, you want to ensure that if you live for another 20 or 30 years that it does not eat away at your savings or your children’s inheritance. 

“There are over 100 types of equity release available including lifetime mortgages and home reversion - and the option to put money aside as inheritance and benefit if your home increases in value. 

“You should consider various potential outcomes. Will you want to downsize in a few years time? Would you like to repay the loan early? These are all important things to consider and could save you huge sums of money.” 

Should I speak to a financial advisor or broker? 

“Whilst not a requirement, it could certainly be worth speaking to a financial advisor to fully understand all the terms of an equity release mortgage and to make sure that you have your own personal finances and family’s best interests at heart,” said Beard. 

“By using a broker, you could receive sound advice and also find the perfect plan to suit your requirements.” 

Are you interested in finding out more? You can enquire with Lending Expert today or speak directly to an advisor on 0161 820 8099. 

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